Building a unique consumer base for each variety - therefore avoiding cannibalizing the parent brand - is one of its strategies for success.
The American spirits and wine giant has been eyeing up flavored whiskey, premium spirits and authentic American whiskey as growth areas into 2016 for some time, but in last week’s quarterly earnings call CEO Paul Varga warned competition is increasing.
He summed up flavored whiskey as a “really dynamic category where there is a lot of competition, a lot of change, and a lot of new entrants that will make a bunch of noise.”
But he believes that by responsibly and carefully developing Jack Daniel’s, the company can continue to beat off rivals and build success in each of its varieties.
Competition heats up
Varga eyes up a large number of new entrants in the flavored whiskey category, with craft and super-premium particular areas to watch.
“[There] has been intensifying competition in the American whiskey segment as new entrants in craft, premium plus, and flavored whiskey have exploded in recent years,” he said.
“While some of this expands interest in the category, at the same time it is a direct source of competition, particularly for the most proven and established players such as Jack Daniel’s.”
Increased competition in the category makes it difficult to predict success, he added.
Avoiding the fate of flavored vodka
Jack Daniel’s Tennessee Whiskey (the black label parent brand) surpassed 5m cases in the US in the most recent quarter for the first time, which Varga champions as evidence of a high level of consumer acceptance, particularly in its super premium price range.
Jack Daniel’s Tennessee Whiskey is joined by Jack Daniel’s Single Barrel, Gentleman Jack Double Mellowed Tennessee Whiskey, Jack Daniel’s Tennessee Honey, Jack Daniel’s Tennessee Fire (a cinnamon-flavored whiskey launched last year), and Jack Daniel’s Winter Jack (a seasonal blend of apple cider liqueur and spices) among others.
Asked how flavored whiskey can avoid the fate of flavored vodka, Varga responded that each Jack Daniel’s brand must be developed carefully and responsibly: treated as individual bona fide brands rather than line extensions.
By doing so, each variety can attract its own new consumers and avoid cannibalizing the parent brand.
“The brand has held extremely well to its own innovation where there was the possibility of cannibalization.
"It’s not uncommon to observe brand innovations that will significantly cannibalize the parent, but the development of expressions like Gentleman Jack and Jack Daniel’s Tennessee Honey have not held back Jack Daniel’s volumetric progress,” he said, looking back at sales to date.
'Jack Daniel’s is not your normal brand. I believe it to be a special brand and often the exception to the rule.'
CEO Paul Varga on the brand’s 149 year track record in the US
“I’ll use the US in this example of being able to attract new consumers through both Jack Daniel’s Tennessee Honey (and from what we are seeing in the early days of Jack Daniel’s Tennessee Fire) to not only the whiskey category but to the Jack Daniel’s brand - without cannibalizing Jack Daniel’s Tennessee Whiskey.
“I find that it’s very different than say, in the soda business of diet sodas versus mainland sodas, or a light beer versus mainland beer, where they... [saw] considerable cannibalization as one went up and the other went down.”
Developing each brand variety responsibly can avoid this situation in flavored whiskey, Varga continued.
“So far, because these are occupying quite different drinking occasions… if you build the brands in a constructive way and have that in mind, you will have a more prolonged existence as an expression of, in this case, the Jack Daniel’s trademark.
“So that’s what we can do. I can tell you, we are not going to be introducing a brand every three months in order to chase numbers or something like that.”
Brown-Forman saw US net sales rise 8% in its latest quarter, thanks to products like Tennessee Fire, but overall net sales for the quarter declined 2% to $900m.